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appellee Kreps.
Dominick J. Tuminaro, Asst. Atty. Gen. of the State of New York, New
York City (Louis J. Lefkowitz, Atty. Gen., George D. Zuckerman, Asst.
Atty. Gen. in charge of Civil Rights Bureau, Arnold D. Fleischer, Asst.
Atty. Gen., New York City, of counsel), for defendant-appellee State of
New York.
Before OAKES, Circuit Judge, and BLUMENFELD* and MEHRTENS,**
District Judges.
BLUMENFELD, District Judge:
This is an appeal from the decision of the District Court, Werker, J., that
upheld the constitutionality of section 103(f)(2) of the Public Works
Employment Act of 1977 (PWEA), 42 U.S.C. 6705(f)(2). The statute
mandates that "no grant shall be made under this chapter for any local
public works project unless the applicant gives satisfactory assurance to
the Secretary that at least 10 per centum of the amount of each grant shall
be expended for minority business enterprises." "Minority business
enterprise" (MBE) is defined as "a business at least 50 per centum of
which is owned by minority group members . . . ." The statute defines
minority group members in racial terms: "citizens of the United States
who are Negroes, Spanish-speaking, Orientals, Indians, Eskimos, and
Aleuts."
Appellants are several associations of contractors and subcontractors and a
firm engaged in heating, ventilation and air conditioning work. Their
application for a preliminary injunction on their petition for declaratory
and injunctive relief to prevent the Secretary of Commerce as program
administrator from enforcing the MBE provision was consolidated with a
hearing on the merits. The District Court found that the provision was a
constitutionally valid exercise of congressional power to remedy the
effects of past discrimination in the construction industry. The District
Court denied their petition and dismissed the complaint. We affirm.
I.
In 1976 Congress enacted the Local Public Works Capital Development
and Investment Act of 1976, Pub.L.No.94-369 (July 22, 1976), 90 Stat.
999-1012, 42 U.S.C. 6701-6735, designed to help alleviate nationwide
unemployment in the economically depressed construction industry by
appropriating $2 billion for public works projects. The Secretary of
Commerce was to administer the program through the Economic
Lau v. Nichols, 414 U.S. 563, 569, 94 S.Ct. 786, 789, 39 L.Ed.2d 1
(1974), Quoting 110 Cong.Rec. 6543 (1964) (remarks of Sen. Humphrey,
quoting from President Kennedy's message to Congress, June 19, 1963).
The Secretary acknowledges that in enacting the MBE provision Congress
created an explicitly race-based condition on the receipt of PWEA funds.
Under modern equal protection standards,2 racial classifications are
"suspect." This denomination often triggers the highest level of scrutiny
imposed by the courts. Loving v. Virginia, 388 U.S. 1, 11, 87 S.Ct. 1817,
18 L.Ed.2d 1010 (1967). Usually when a classification turns upon an
individual's racial or ethnic background, "he is entitled to a judicial
determination that the burden he is asked to bear on that basis is precisely
tailored to serve a compelling governmental interest." Regents of
University of California v. Bakke, --- U.S. ----, ----, 98 S.Ct. 2733, 2753,
57 L.Ed.2d 750 (1978) (opinion of Powell, J.); In re Griffiths, 413 U.S.
717, 93 S.Ct. 2851, 37 L.Ed.2d 910 (1973). Whether rigid scrutiny is
mandated whenever an act of Congress conditions the allocation of federal
funds in a manner which differentiates among persons according to their
race is a question we need not reach, for we are of the opinion that even
under the most exacting standard of review the MBE provision passes
constitutional muster. 3
III.
The principles which the court below applied in rejecting the appellants'
contentions that the amendment was either unconstitutional or in violation
of the Civil Rights Act of 1964 are not in dispute on this appeal. However,
we restate them briefly in order to put the appellants' argument that they
were misapplied by the trial judge into sharper focus.
The appellants agree that the district judge correctly decided that "strict
scrutiny" was required, but they contend that the standard of review which
such scrutiny requires was not correctly applied. Having conceded below
and properly so, that "a compelling state interest is present if the racial
classification is intended to remedy the vestiges of present and/or past
discrimination," they advance two separate arguments that a compelling
interest was not shown.
Their argument is that there was not an adequate basis for the court below
to conclude that Congress' purpose was to remedy prior wrongs to
minority groups who had been denied opportunities in the construction
industry as a result of race discrimination. This proposition has two
elements that are analytically distinct. That they are treated in
supra, --- U.S. at ---- n. 41, 98 S.Ct. at 2755 (opinion of Powell, J.):
1
"(W)e
are not here presented with an occasion to review legislation by Congress
pursuant to its powers under 2 of the Thirteenth Amendment and 5 of the
Fourteenth Amendment to remedy the effects of prior discrimination. Katzenbach v.
Morgan, 384 U.S. 641, (86 S.Ct. 1717, 16 L.Ed.2d 828) (1966); Jones v. Alfred H.
Mayer, 392 U.S. 409, (88 S.Ct. 2186, 20 L.Ed.2d 1189) (1968). We have previously
recognized the special competence of Congress to make findings with respect to the
effects of identified past discrimination and its discretionary authority to take
appropriate remedial measures."
2
Judge Werker did not base his decision that it was the purpose of Congress to
remedy past discrimination solely on a presumption. There is no need to rely
solely on a bare presumption to determine the purpose of Congress. The
classification established by the amendment is self-evident. The amendment
makes no sense unless it is construed as a set-aside to benefit minority
subcontractors.6 It has been suggested that "(i)f an objective can confidently be
inferred from the provisions of the statute itself, recourse to internal legislative
history and other ancillary materials is unnecessary." Note, Developments in
the Law Equal Protection, 82 Harv.L.Rev. 1065, 1077 (1969). It is also beyond
dispute that the set-aside was intended to remedy past discrimination. To
support that conclusion, it is "enough that (the court) perceive a basis upon
which Congress might predicate a judgment that" the MBE amendment would
remedy past discrimination against minority construction businesses. See
Katzenbach v. Morgan, supra, 384 U.S. at 656, 86 S.Ct. 1717. In view of the
comprehensive legislation which Congress has enacted during the past decade
and a half for the benefit of those minorities who have been victims of past
discrimination,7 any purpose Congress might have had other than to remedy the
effects of past discrimination is difficult to imagine.
B. Past Discrimination
3
Although Congress' purpose and the factual background from which it sprang
are not so disjoined that they could not be considered together, Judge Werker
considered the question of past discrimination separately. The comprehensive
opinion of the District Judge to which we make reference considered remarks
made on the floor of the House when the MBE provision was introduced
during the debate on the PWEA. He noted that Representative Mitchell, the
amendment's sponsor, criticized the federal program of assistance to minority
businesses that permits them to become "viable entities in our system" only to
be "cut off" when government contracts are awarded. See Joint App. 160a; 123
Cong.Rec.H. 1437 (daily ed. Feb. 24, 1977), Reprinted in Associated General
Contractors v. Secretary of Commerce, 441 F.Supp. 955, 997-1006
(C.D.Cal.1977) (Appendix C). In concluding that Congress found past
discrimination, he also properly relied upon remarks made by Representative
John Conyers of New York. Speaking in favor of the amendment, the
Representative observed that "minority contractors and businessmen who are
trying to enter in on the bidding process . . . Get the 'works' almost every time."
Id. (emphasis added). Those remarks clearly disclosed the connection between
the past discrimination and the "set-aside" amendment, and powerfully
reinforced the conclusion reached by the judge.8
4
The judge quite properly took account of the data and observations contained in
a report prepared by the Department of Commerce to evaluate existing
opportunities for minority business. See U.S. Dept. of Commerce, Office of
Minority Business Enterprise, Minority Business Opportunity Handbook
(August 1976). Noting plaintiffs' objection to the soundness of the data
contained in the report, the Judge found "even if the statistics for minority
businesses were to be doubled, there would still be an ample basis for Congress
to conclude that 'the severe shortage of potential minority entrepreneurs with
general business skills is a result of their historical Exclusion from the
mainstream economy.' " Joint App. 161a quoting from the Minority Handbook
at 1-1-2 (court's emphasis included).
7
"The
very basic problem . . . is that, over the years, there has developed a business
system which has traditionally excluded measurable minority participation. In the
past more than the present, this system of conducting business transactions overtly
precluded minority input. Currently, we more often encounter a business system
which is racially neutral on its face, but because of past overt social and economic
discrimination is presently operating, in effect, to perpetuate these past inequities.
Minorities, until recently have not participated to any measurable extent, in our total
business system generally, Or in the construction industry, in particular. However,
inroads are now being made and minority contractors are attempting to 'break-into' a
mode of doing things, a system, with which they are empirically unfamiliar and
which is historically unfamiliar with them."
8
IV.
9
10
Ours is not the only circuit in which the MBE amendment's constitutionality
has been challenged by associations of general contractors. Other cases that
have denied preliminary injunctions against enforcement of the "set-aside"
provision are Rhode Island Chapter, Associated General Contractors v. Kreps,
No. 77-0676 (D.R.I. Feb. 6, 1978); Associated General Contractors v. Secretary
of Commerce, No. 77-4218 (D.Kan. Dec. 19, 1977); Carolinas Branch,
Associated General Contractors v. Kreps, 442 F.Supp. 392 (D.S.C.1977); Ohio
Contractors Association v. Economic Development Administration, 452
F.Supp. 1013 (S.D.Ohio 1977); Montana Contractors Association v. Secretary
of Commerce, 439 F.Supp. 1331 (D.Mont.1977); Florida East Coast Chapter v.
Secretary of Commerce, No. 77-8351 (S.D.Fla. Nov. 3, 1977). But see
Associated General Contractors v. Secretary of Commerce, 441 F.Supp. 955
(C.D.Cal.1977), Vacated and remanded, --- U.S. ----, 98 S.Ct. 3132, 57 L.Ed.2d
1153 (1978), which held the provision invalid.15 That case reached the
Supreme Court where it was remanded to the District Court for consideration of
mootness. See also Wright Farms Construction, Inc. v. Kreps, 444 F.Supp.
1023 (D.Vt.1977).16
12
Both the Third and the Sixth Circuits have upheld the constitutionality of the
MBE amendment. Constructors Association v. Kreps, 573 F.2d 811 (3d Cir.
1978); Ohio Contractors Association v. Economic Development
Administration, 580 F.2d 213 (6th Cir. 1978). We agree with their decisions
that section 103(f)(2) of the Public Works Employment Act of 1977, 42 U.S.C.
6705(f)(2), is not unconstitutional.
13
Senior United States District Judge for the District of Connecticut, sitting by
designation
**
Senior United States District Judge for the Southern District of Florida, sitting
by designation
The Act required that each eligible project be started within 90 days of EDA
approval (42 U.S.C. 6705(d)), any application that was not rejected within 60
days of its submission to EDA would be deemed approved (42 U.S.C. 6706),
and the EDA was ordered to promulgate regulations governing grant
applications within 30 days of the Act's passage (42 U.S.C. 6706). The Act
became law on May 24, 1977 and funds allocated under the PWEA had to be
committed to an approved state or local project by September 30, 1977
Four Justices of the Supreme Court have indicated that an intermediate standard
of scrutiny is sufficient when Government "acts not to demean or insult any
racial group, but to remedy disadvantages cast on minorities by past racial
prejudice, at least when appropriate findings have been made by judicial,
The notion that any conceivable purpose which would uphold a classification
should be attributed to it, E. g., McGowan v. Maryland, 366 U.S. 420, 425-26,
81 S.Ct. 1101, 6 L.Ed.2d 393 (1961), allows for more judicial restraint than
strict scrutiny permits. In McGowan the Court stated that the Equal Protection
Clause is violated only if the classification rests on grounds wholly irrelevant to
the achievement of the State's objective a statutory discrimination will not be
set aside if any state of facts may reasonably be conceived to justify it
The appellants argue that the legislative history is silent with respect to any
purpose to remedy the effect of past discrimination, and shows only that $4
billion which Congress allocated under the PWEA was expected to generate
300,000 jobs in other industries. But, by that particular amendment ( 103(f)
(2)), injected in the Act from the floor during the course of the debate,
Congress did not create more jobs. It is clear from the amendment that
Congress intended to guarantee that part of the jobs already contemplated by
the PWEA would go to minority businesses, and not, as the plaintiffs contend,
to "disadvantaged as opposed to minority small businesses."
For example, Civil Rights Act of 1964, Pub.L.No. 88-352, 78 Stat. 241
(codified at 28 U.S.C. 1447; 42 U.S.C. 1971, 1975a-1975d, 2000a to
2000h-6); Pub.L.No. 92-261, 2-8, 10, 11, 13, 86 Stat. 103-113 (codified at
42 U.S.C. 2000e, 2000e-1 to 2000e-6, 2000e-8, 2000e-9, 2000e-13 to 2000e17); Pub.L.No. 92-318, title IX, 906(a), 86 Stat. 375 (codified at 42 U.S.C.
2000c, 2000c-6, 2000c-9); Pub.L.No. 93-608, 3(1), 88 Stat. 1972 (codified at
42 U.S.C. 2000e-4); Pub.L.No. 94-273, 3(24), 90 Stat. 377 (codified at 42
U.S.C. 2000e-14); Voting Rights Act of 1965, Pub.L.No. 89-110, 79 Stat.
437; Pub.L.No. 90-284, title I, 103(c), 82 Stat. 75; Pub.L.No. 91-285, 3-6,
84 Stat. 315; Pub.L.No. 91-405, title II, 204(e), 84 Stat. 853; Voting Rights
Act Amendments of 1970, Pub.L.No. 91-285, 84 Stat. 314, 315; Voting Rights
Act Amendments of 1975, Pub.L.No. 94-73, title II, 204, 206, title IV,
405, 89 Stat. 402, 404 (codified at 42 U.S.C. 1971 Et seq.); Civil Rights Act
of 1968, Pub.L.No. 90-284, 82 Stat. 73-92 (codified at 18 U.S.C. 231-233,
241, 242, 245, 1153, 2101, 2102; 25 U.S.C. 1301-1303, 1311, 1312, 1321-
1326, 1331, 1341, 28 U.S.C. 1360 nts.; 42 U.S.C. 1973, 3533, 3535, 36013619, 3631); Pub.L.No. 93-265, 88 Stat. 84 (codified at 25 U.S.C. 1341)
8
Judge Snyder in Constructors Ass'n v. Kreps, supra, found the same passage
sufficient evidence that Congress enacted the MBE provision to remedy past
discrimination in the construction industry
10
This explains the absence of any mention of the amendment in the Committee
reports. Furthermore, the lack of extended discussion clearly indicates the
knowledge of the congressmen concerning the well-established history of past
discrimination in the construction industry
11
Many of those cases are cited by Chief Judge Coffin in support of a decision
upholding that principle in Associated Gen. Contractors v. Altshuler, 490 F.2d
9, 16-17 (1st Cir. 1973), Cert. denied, 416 U.S. 957, 94 S.Ct. 1971, 40 L.Ed.2d
307 (1974), along with Contractors Ass'n v. Secretary of Labor, 442 F.2d 159
(3d Cir.), Cert. denied, 404 U.S. 854, 92 S.Ct. 98, 30 L.Ed.2d 95 (1971), which
is cited with approval in Bakke, --- U.S. at ----, 98 S.Ct. 2754
Section 6705(f)(2) merely broadens the economic area in which that principle
applies to include independent contractors in the construction industry. We do
not attempt to draw any distinction between services and materials which might
be furnished by independent subcontractors on construction jobs. We note,
however, that a person conducting a minority business who is denied an
opportunity to compete for a certain amount of business on account of his race
would have a cause of action under 42 U.S.C. 1981. Runyon v. McCrary, 427
U.S. 160, 96 S.Ct. 2586, 49 L.Ed.2d 415 (1976); Hollander v. Sears, Roebuck
& Co., 450 F.Supp. 496, 499-500 (D.Conn.1978).
12
Transportation Co., supra. See also Acha v. Beame, supra; United States v.
Sheet Metal Workers Local 36, 416 F.2d 123 (8th Cir. 1969). The effect here is
minimal when compared with Rios v. Enterprise Ass'n Steamfitters Local
Union 638, 501 F.2d 622 (2d Cir. 1974), which upheld an order to a union to
admit minority applicants to an apprenticeship program in sufficient numbers to
achieve a goal of 30 percent nonwhite membership
16
In Wright Farms Constr., Inc. v. Kreps, supra, the court made a specific finding
that Vermont had a small minority population, and therefore held the MBE
provision unconstitutional as applied to contractors in that state. However,
Congress clearly manifested its intent that the set-aside provision should not
apply in such a case. See 123 Cong.Rec. 1437 (daily ed. Feb. 24, 1977),
Reprinted in Associated Gen. Contractors v. Secretary of Commerce, supra,
441 F.Supp. at 998-99 (Appendix C), where Representative Mitchell, the
sponsor of the amendment, engaged in the following colloquy with
Representative Kazen:
"Mr. Kazen: All right. What happens in the rural areas where there are no
minority enterprises? Will the 10 percent be held up in order to bring minority
enterprises from somewhere else where there is no unemployment into a place
where there is unemployment and there is no minority enterprise?
"Mr. Mitchell of Maryland: In response to the gentleman's question, the answer
is 'No.'
". . .tch
". . . Let me tell the gentleman why that would not occur. When PresidentS
Nixon and Ford put out their Executive orders to all the agencies to utilize
minority contractors, the agencies then established certain guidelines which
said, all right, we will utilize these minority contractors wherever possible, but
where there are none, there can be no utilization, and therefore no project
should be delayed.
"For example, I would not expect to take my minority contractors from
Maryland into Idaho to meet that State's requirement. That will not be an issue.
"Mr. Kazen: If the gentleman would yield further, this is what I wanted the
gentleman to clarify, that where there are no minority enterprise contractors
(then) this provision would not be in effect; am I correct?
"Mr. Mitchell of Maryland: That is absolutely correct, and that is done by
administrative action already on the books with all of the agencies.
"Mr. Kazen: Does the gentleman's amendment leave room for that type of
discretion in the Secretary?
"Mr. Mitchell of Maryland: I assume that it does. It would be my intent that it
would because that is existing administrative law."
As Representative Mitchell amplified further, 123 Cong.Rec. 1438, Reprinted
in 441 F.Supp. at 1000:
". . . I reiterate what I said earlier, that we already have in existence within the
agency structure the SOP administrative law that says this kind of amendment
would not apply where there are no minority contractors or where there are no
minorities. It is already in the law."